Seemingly overnight, sleep medicine has grown into a multibillion-dollar industry. And it shows
few signs of dozing off soon.

During the past five years, the sleep-clinic industry has expanded at an average annual rate of
more than 13 percent, to $5.8 billion in revenue this year, according to market-research firm
IBISWorld Inc.Over the next five years, the industry’s yearly revenue is expected to near $9
billion on the strength of 9 percent annual growth.

Meanwhile, manufacturers had combined revenue of $1.3 billion last year for sleep-disorder
diagnostic and therapy products in the United States, according to research firm InMedica.

And Americans spent $1.7 billion on prescription sleep drugs in 2011, according to research firm
IMS Health. That figure has declined in recent years as drug production shifts to less-expensive
generics. (It doesn’t include spending on over-the-counter sleep aids.)

Experts say the nation’s obesity epidemic has fueled the industry’s growth by contributing to
sleep disorders such as apnea. Another possible growth driver, IBISWorld says, is the proliferation
of electronic devices, the light from which might interfere with the release of melatonin, a
sleep-regulating hormone.

To a large extent, “sleep disorders are a modern man’s issue,” said Joyce E. Gray,
secretary/treasurer and founding member of the Ohio Sleep Society.“We’re seeing more patients come
in for different types of disorders.”

In Ohio, one sign of the industry’s growth is the Ohio Sleep Society’s ballooning membership
roll. Founded five years ago, the society now counts 125 members, among them pulmonologists,
neurologists, cardiologists, psychologists, makers of durable medical equipment, nurses, nurse
practitioners and dentists (dental appliances are in some cases emerging as an alternative
treatment for sleep apnea).

Gray, a registered nurse who manages the Samaritan Sleep Center at Good Samaritan Hospital in
Dayton, said sleep-disorder treatments now have a great deal of peer-reviewed literature vouching
for their effectiveness. That has led to more insurance coverage for the diagnosis and treatment of
sleep disorders, which also has buoyed the industry. The society has not attempted to quantify the
industry’s size in Ohio, Gray said.

The American Academy of Sleep Medicine said it has 2,485 accredited sleep-disorder centers,
nearly five times the 502 that were accredited in 2000. Annual revenue averages about $1.5 million
per center, with profit margins of about 8.8 percent, according to IBISWorld.

Local examples of the industry’s meteoric growth abound.OhioHealth, which had two sleep centers
in 2005, now has 11. Ohio State University’s Wexner Medical Center, which has the area’s only
sleep-medicine fellowship training program, said it performed about 3,200 sleep studies in its
most-recent fiscal year, up from about 1,800 five years earlier.And the sleep-program staff at
Nationwide Children’s Hospital has easily doubled in the past decade, said Ed Buggie, the hospital’s
program manager for neurosciences.

“There’s a lot of work being done with autism and sleep,” Buggie said. “There’s some belief that
there’s an increased abnormality in sleep in kids with autism.”

With sleep apnea affecting about 1 in 20 men and 1 in 30 women, Dr. David Ralston said much of
the industry’s current growth is driven by need.

“Sleep medicine is still in its infancy,” said Ralston, medical director of Central Ohio Sleep
Medicine, which is 60 percent owned by Mount Carmel Health System and 40 percent owned by
physicians.

The area’s four hospital systems employ more than 150 people to conduct about 15,000 sleep
studies annually. Those studies often play a role in diagnosing more than 80 types of sleep
disorders, ranging from narcolepsy (sudden attacks of deep sleep) to hypersomnia (sleeping for an
excessively long time).

All that growth has implications for taxpayers. Medicare payments to sleep clinics nearly
quadrupled between 2001 and 2009, from $62 million to $235 million, according to the U.S.
Department of Health and Human Services’ Office of Inspector General.

Health insurers are pushing for more at-home sleep studies, saying that they are as effective as
sleep studies conducted in the lab while achieving better compliance at lower cost. Anthem Blue
Cross and Blue Shield in Ohio said in-home tests generally cost around $400, significantly less
than overnight tests that might cost $1,000 in a free-standing sleep center or $2,000 in a hospital
outpatient setting.

Anthem’s sister company, AIM Specialty Health, analyzed claim data and found that about 1
percent of all testing for sleep apnea takes place in the home, even though it might be effective
for as many as 80 percent of patients.

In October, Anthem plans to roll out a program in Ohio that will certify the need for having a
sleep test performed at a facility rather than at home.

Reflecting the shift toward home sleep testing, Kelly Patrick, a senior analyst with InMedica,
predicts that revenue will decline 1 percent annually between 2010 and 2015 for medical devices
used in clinical labs, but will soar 15 percent annually during that period for devices used at
home.

Given the tremendous number of sleep centers that have opened in a short period, the Ohio Sleep
Society suggests that prospective patients seek out a sleep center accredited by the American
Academy of Sleep Medicine.